Firstly, I need to explain that we haven’t got the detail yet. But based on what we have heard, and a little written input, these are my initial thoughts:
The good news:
It is good news that we haven’t heard about any reduction in tax relief for personal pension contributions and no reduction in what you can contribute into pensions.
In addition, your tax-free cash drawn from pensions remains unchanged at 25% of fund value with a limit for most of us of £268,275.00 for tax free cash.
No mention was made to the removal of the Lifetime Allowance for pensions either. The Lifetime Allowance remains abolished leaving us with no cap on pension fund values in the UK generally. New rules applied from 06/04/2024.
No increase to fuel duty. We maintain the current status quo.
Electric Vehicle drivers will have better road tax charges, lower than other cars.
The bad news:
Again, without much detail, it looks like pensions could form part of your estate for inheritance tax from April 2027. Technically this could be difficult to do, hence the timeframe.
At least we will have time to plan, to change strategy.
The reduction in the inheritance tax efficiency of AIM shares is also a concern. If you held Business Relief qualifying AIM shares for more than two years, you would not pay inheritance tax on them. It now looks like you will pay 20% inheritance tax on AIM shares.
Bad news for employers too, employer National Insurance set to increase by 1.2% to 15% in April 2025. The employer NI threshold will be lowered from £9,100.00 to £5,000.00 per annum for employees too. But to protect smaller businesses, the Employment Allowance will increase from £5,000.00 to £10,500.00.
Again, for employers, the National Minimum Wage is set to increase to £12.21 an hour from next April. This has a knock-on effect on other pay scales too.
Vehicles that aren’t fully electric will pay more road tax.
Summary
We haven’t got the detail yet, and the devil is always in the detail. My initial thoughts are that although Labour say they want to grow our economy here in the UK, some of the measures outlined above, particularly those that impact on employers, do not help businesses grow.
In addition, taxing invested assets, AIM shares and pensions, is not necessarily the right messaging for making long-term saving provision to take the burden off the State and our benefits system. We need incentives to invest for the long term.
I re-iterate, we need to see more detail now. I’m booked on four post Budget technical webinars over the next few days, and I’ll have all of the available detail shortly. Some of the legislative change, bringing pensions into inheritance tax for example, is complex. We won’t know this detail for a while.
Look out for further blogs on the Budget.
Steve Speed
30/10/2024